Electricity rate caps at issue

Sam KennedyOf The Morning Call

The idea of extending electricity rate caps appears to be gaining momentum in Harrisburg.

Gov. Ed Rendell has invited two proponents of extending caps, Sen. Lisa Boscola, D-Northampton, and Rep. Camille George, D-Clearfield, to discuss the matter next week. Both Boscola and George have drafted legislation that would head off a surge in electricity prices by extending caps that are due to expire in 2010 and 2011.

"Sometimes I feel like Paula Revere," Boscola said in a news release late Tuesday. "Deregulation is coming! Deregulation is coming! And no one around me knows what I'm talking about.

"But, it's coming and it will hurt people, kill small businesses, and be one more huge shock to household budgets that middle-class, working families just can't afford," she said.

Under pressure from the electric industry and large electricity consumers, Pennsylvania began to deregulate its electric industry in 1996. The change meant the state's Public Utility Commission would no longer be able to set electricity prices, as it had for decades.

Rate caps were put in place to protect customers from temporary price spikes associated with the new way of doing business -- one in which prices would be determined by market forces. The end of rate caps in 2010 and 2011 represents the final step in Pennsylvania's gradual transition to deregulation.

Rendell aide Steve Crawford said the governor wants to meet with Boscola and George "to get an understanding of what they have in mind and talk the issue through."

He said Rendell's first priority remains passage of his "energy independence strategy," which calls for, among other things, expanding wind and other renewable sources of power. The strategy, unveiled nearly a year ago, will help keep electricity prices under control, he said.

But the slow pace of progress on the strategy means lawmakers are beginning to turn their attention to alternatives, including extending rate caps, Crawford said.

"The longer this goes on, the more pressure there will be to do something," he said.

PPL Corp. of Allentown, whose rate cap is due to expire in 2010, is vehemently opposed to extending caps. Caps for other major Pennsylvania electricity providers, including Metropolitan Edison Co. and PECO, are to end in 2011.

"It merely postpones the inevitable," PPL spokesman Dan McCarthy said. "The price of electricity has increased all over the country. Without deregulation and the rate caps that are in place, PPL customers would likely already be paying higher prices."

An extension could force PPL subsidiary PPL Electric Utilities, which serves 1.4 million Pennsylvania customers, into bankruptcy, according to McCarthy.

On Jan. 1, 2010, PPL rates are expected to surge 35 percent for residents and up to 42 percent for some businesses. The rising cost of coal, oil, natural gas and other power-plant fuel have made electricity more expensive to produce. Critics of electricity deregulation say fuel cost doesn't fully explain the increase in prices.

One version of Boscola's legislation would hold caps in place for an extra five years.

McCarthy said PPL Electric Utilities would stand to lose $100 million a month if rate caps were held in place beyond 2010.